MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING MONDAY, DECEMBER 1, 1997 (3)
The U.S. market for foreign crudes with January delivery dates remained unfreindly, with Nigerian cargo prices considered too high, the "arb""for North Sea barrels very tight and generally ample supply from short-haul Latin producers.
Traders said Nigerian Qua Iboe and Forcados cargoes for arrival early January were on offer at $1.80 over dated Brent on a delivered basis.
"That's cheap by fob standards, but expensive for the U.S.," one foreign trader said.
The extremely narrow West Texas Intermediate/North Sea Brent arbitrage makes WTI-related foreign crudes more attractive than West African grades whose prices are tied to Brent. The WTI/Brent spread for January delivery settled at 49 cents on Monday, while the arb is considered to be open only well above $1.00.
Offers for the last Cusiana cargo in the December program were at minus 45 cents, weaker than last week's 35 cents discount.
In addition to Ecopetrol's three December Cusiana cargoes, an equity producer sold another cargo last week, traders said. The additional cargo traded at 56 cents under January/WTI, traders said, while Ecopetrol's cargoes sold at minus 55 cents, minus 50 cents and minus 45 cents, they said.
On the sour side, the future of the "oil-for-food""deal under which Iraq sells its crude for humanitarian aid remained undecided, though it may be resolved by the end of the week when the current leg runs out. The Security Council is expected to renew the deal for another six months at $2 billion for the period, though leaving open its option to increase the deal during that period.
Baghdad blew hot and cold in the last few days over whether it would accept such terms and it was unclear if there would be any delays in starting a third round.
U.S. lifters of Iraqi Basrah Light crude said they had not begun discussions with the Iraqi state oil marketing organisation (SOMO) about sales under the next round of the oil-for-food deal with the United Nations. Traders said SOMO was waiting
for a final agreement before it would discuss the details of new contracts.
"They're playing it by the book. They won't talk about prices, dates or volumes yet," said one buyer of Iraqi crude.
Traders said because of the uncertainty they had not yet chartered ships to load crude in the next round.
"SOMO could get oil flowing again within a few days of a deal, but shipping is fairly abudant at the moment and we're not going to do anything until the picture is clear," said one.
Venezuela's extra-heavy, sour crude BCF-17 was said to be trading at a discount of $4.50 under U.S. benchmark WTI, and traders said the Venezuelan grade was competitive to Mexican Maya at these levels, despite the fact that Pemex cut December prices for its heavy crude.
MARKET ACTIVITY
The Toronto Stock Exchange Index jumped up 1.7% or 111.09 to 6623.87.
In comparison, the Toronto Oil & Gas Composite leaped in the opposite direction, down 1.8% or 117.77 to 6507.83. Of the sub-components, the Integrated Oils lost 2.7% or 232.08 to 8406.45. The Oil & Gas Producers fell 1.3% or 75.96 to 5817.55 and the Oil & Gas Services was down 2.7% or 86.94 to 3098.61.
Orbit Oil & Gas, Gulf Canada Resources, Anderson Exploration, Poco Petroleums, Petro-Canada, Norcen Energy Resources, Elk Point Resources, Talisman Energy, Rio Alto Exploration, Canadian Natural Resources, Rigel Energy and Imperial Oil were among the top 50 most active issues on the TSE.
Not one oil was listed among the top 50 net gainers.
K2 Energy was up 10.4% to $1.49, Bellator Exploration 10.0% to $2.75, Search Energy 10.0% to $1.10 and Richland Petroleum 9.2% to $4.75.
On the downside, Chieftain International fell $1.50 to $31.25, Amber Energy $1.45 to $19.00, Suncor Energy $1.25 to $45.70, Imperial Oil $1.20 to $82.50, Talisman Energy $1.10 to $40.95, Petro-Canada $0.90 to $24.50, Canadian Natural Resources $0.80 to $30.75, Denbury Resources $0.80 to $29.45,Pinnacle Resources $0.80 to $19.05, Northrock Resources $0.75 to $21.75, Pacalta Resources $0.65 to $15.75, Baytex Energy $0.60 to $15.35, Remington Energy $0.55 to $22.75, Shell Canada A $0.55 to $24.75 and Seven Seas Petroleum $0.50 to $17.50.
Percentage losers included Cavell Energy 14.6% to $1.11, Black Sea Energy 7.7% to $2.40, Amber Energy 7.1% to $19.00, Ram Petroleum 7.1% to $1.05, Purcell Energy 6.7% to $1.40 and Newquest Energy 6.0% to $7.00.
There were no new 52-week highs.
Baytex Energy, Bow Valley Energy, Canadian Conquest Exploration, Canadian Natural Resources, Merit Energy, Northstar Energy and Palliser Energy reached new 52-week lows.
In the oil & gas services group, as well as those companies with close ties to the industry, none were listed among the most active traded issues.
Artisan Corp. gained $1.50 to $14.00 and Shaw Industries $1.50 to $47.00.
Artisan Corp rose 12.0% to $14.00.
On the downside, Veritas Energy fell $5.00 to $55.00, Dreco Energy Services $1.25 to $44.00, Prudential Steel $1.25 to $13.30, Precision Drilling $1.05 to $35.80, Enerflex Systems $1.00 to $36.00 and Plains Energy Services $0.90 to $10.10.
Percentage losers included Prudential Steel 8.6% to $13.30, Veritas Energy 8.3% to $55.00 and Plains Energy Services 8.2% to $10.10.
ATCO I reached a new 52-week high.
There were no new 52-week lows.
Over on the Alberta Stock Exchange, ICE Drilling, Enerprise Developement, Trego Energy, Oxbow Exploration, Ascot Energy Services, Cirque Energy, Wild Horse Resources, Gopher Oil & Gas, Green Maple and Niko Resources were among the top 30 most active traded issues.
Red Sea Oil gained $0.20 to $1.30, Jett Investment $0.19 to $1.25, AltaQuest Energy $0.17 to $2.25, Kensington .A $0.10 to $1.45, Prize Energy $0.10 to $0.55 and Scimitar Hydrocarbons $0.10 to $0.80.
Percentage gainers included Moiibus Resources 22.6% to $0.38, Prize Energy 22.2% to $0.55, Red Sea Oil 18.2% to $1.30, Jett Investment 17.0% to $1.25, Para-Tech Energy 14.3% to $0.32, Scimitar Hydrocarbons 14.3% to $0.80, Gold Star Energy 10.0% to $0.55 and Oilexco 10.0% to $0.33.
On the downsidde, Palmetto Resources fell $0.21 to $1.31, Belfast Petroleum $0.20 to $2.60, ICE Drilling $0.18 to $1.12, Derrick Energy $0.16 to $1.20, Farm Energy $0.14 to 0.46, Quest Energy $0.14 to $0.25, Blue Power Energy $0.12 to $0.43, CanBaikal Resources $0.12 to $1.80, NTI Resources $0.12 to $0.97, Suprex Energy $0.12 to $0.06, Alma Oil & Gas $0.10 to $0.65 and Telford Resources $0.10 to $1.10.
Percentage losers included Quest Energy 35.9% to $0.25, Farm Energy 23.3% to $0.46, Blue Power Energy 21.8% to $0.43 and Crispin Energy 20.0% to $0.20
Granger Energy B and Trego Energy gained new 52-week highs.
New 52-week lows included Burner Exploration, Canop Worldwide, Endeavour Resources, Epic Energy, Green Maple and Suprex Energy.
Tuesday, December 2, 1997
Oil stocks take dip on OPEC decision
The Financial Post
Canada's battered oil and gas stocks took another beating yesterday as crude oil prices fell to their lowest level in five months following a decision by the Organization of Petroleum Exporting Countries to boost production by 10%.
The Toronto Stock Exchange oil and gas index closed at 6507.83 on the day, its lowest close since May and down 117.77 from Friday's close.
The subindex has been in a free fall since reaching 8031.57 Oct. 7, as the overheated industry struggles with higher costs, weakening commodity prices and expectations of softer demand from Asian countries.
Crude for January delivery finished US49› a barrel lower, at US$18.66, on the New York Mercantile Exchange, the lowest close for nearest-term crude in five months.
January gasoline followed crude, ending at US56.25› a gallon, US0.86› lower. January heating oil ended US1.58› a gallon lower, at US52.71›.
OPEC, which produces 40% of the world's oil supply, decided on the weekend to increase its output quota to 27.5 million barrels a day in January. But despite yesterday's drops, industry analysts say it's too soon to predict a downturn for the Canadian sector.
"Fundamentally the supply of oil hasn't changed," said Martin Molyneaux, managing director of institutional research at First Energy Capital Corp. in Calgary. "It's just that OPEC is giving themselves a higher quota, but they are already producing at that kind of level. So, I think oil prices have overreacted."
His average oil price forecast for 1998 is unchanged at US$19.50 for west Texas intermediate.
A silver lining for the Canadian sector is the low Canadian dollar. Its oil production, and 70% of natural gas production, is sold in US$s.
The outlook for the supply/demand balance is good, backing prices in the US$21 to US$21.50 range next year, predicted Bob Hinckley, an analyst in New York with Merrill Lynch & Co.
Because of buoyant economies, particularly in North America, "demand has been outstripping our expectations," Hinckley said.
"So, I think the long-term view is quite positive because there is dwindling surplus production capacity, particularly within OPEC."
If the low prices continue, it could cause the Canadian industry to review its spending plans for next year.
In the shorter term, winter drilling is going ahead because producers have locked into commitments amid an industry-wide shortage of all types of services.
Oil and gas stocks could fall even further if oil prices stay soft, Molyneaux said.
"Generally at these levels, I don't think equities are reflecting US$18.50 oil prices. They're reflecting mid-US$19 range," Molyneaux said.
Drillers continue month-long slide on OPEC news
In the U.S., oilfield-service stocks continued their collective, month long decline on Monday, with OPEC's increased production quota providing yet another reason for investors to dump these issues.
But analysts said the OPEC announcement and the United Nations secretary general's mendation that Iraq be allowed to sell more oil were not the real reasons for the group's decline.
''That's the excuse du jour,'' said Morgan Keegan analyst William McAtee. ''It's just a continued sell-off that's been going for a month and a half.''
Halliburton Co (NYSE:HAL) was off 2-3/16 at 51-3/4, Schlumberger Ltd [NYSE:SLB] the S&P oil drillers index (.SPOILW) was off 4.16 percent.
As of November 5, the index had been up 77 percent for the year. Through Friday, it was up 53 percent.
''The stocks have all gotten pretty much hammered,'' said Schroder & Co analyst James Stone. ''People are looking to lock in gains by the end of the year.''
''Today's really not that much different from the last couple of weeks,'' he added.
Oil prices declined on Monday after the Organization of Petroleum Exporting Countries decided to increase its output by 10 percent and United Nations Secretary-General Kofi Annan recommended that Iraq be allowed to sell more of its oil.
Pride International Inc (NYSE:PDE) was off 1-1/2 at 26-1/8, Diamond Offshore Drilling Inc (NYSE:DO) was off 4-1/16 at 45-13/16 and Oceaneering International Inc (NYSE:OII) was off 2-5/8 at 18.
''And yet the fundamentals on the individual companies haven't changed a bit,'' McAtee said.
Drillers in Canada also suffered setbacks in share prices. Dreco Energy Services (TSE/DEY) closed down $1.25 to $44.00, Precision Drilling (TSE/PD)down $1.05 to $35.80 Enerflrex Systems (TSE/EFX)$1.00 to $36.00 and Plains Energy Services (TSE/PLA) $0.90 to $10.10.
In closing this column today, I want to apologize for the lack of reporting over the past few days. I was on R&R (rest & relaxation) program and needed the time off.
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